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American Account: Irwin Stelzer: Falling dollar and rising oil form a dangerous mix

HAPPENINGS in the two global markets that do not conform to Adam Smith’s model frequently roil free-market economies such as America’s.

The foreign-exchange market is dominated by central banks that manipulate the value of national currencies for reasons unrelated to what we think of as natural economic forces. And the oil market is heavily influenced by a producer cartel that is determined to keep prices well above those that would prevail in a competitive market.

So when the Korean central bank announced that it had lost interest (no pun intended) in acquiring more dollar assets to add to the $200 billion it already holds, and the Opec oil cartel drove prices above $50 a barrel by suggesting that it would cut output, shivers ran up the spines of investors. Share prices and the dollar both lost some 1.5% of their value in a single day.